You Have CapEx – What About TechEx?

Posted by Travis Morrow on Feb 5, 2025 12:10:25 PM

Once upon a time, the self-storage industry was…let’s just say “technologically challenged.” And it worked. Other than offering storage space, not much was needed to be successful other than fences, padlocks, and mom and pop, who often lived on the site to oversee things. But the industry has come a long way and today self-storage has begun implementing new property technology or “proptech” that changes the way facilities are developed, marketed, managed, and occupied. This proptech boom, which Forbes reports is being driven by the increasing adoption of the Internet of Things (IoT), machine learning (ML), artificial intelligence (AI), and virtual reality (VR), is expected to expand at a compound annual growth rate of nearly 16 percent through 2030.

Despite this, when talking with owner-operators at various events, I’ve found that many don’t budget for technology. They set aside money for CapEx of course, using it for facility repair and maintenance (roofing, painting, asphalt, and so on). But they don’t treat tech in a similar fashion – there is no “TechEx” so to speak, even though many of these expenses also could fall into the bucket of a long-term investment.

Lance Watkins, CEO of self-storage technology platform Tenant, Inc., has also noticed the lack of technology budgeting. "The most successful self-storage operators understand that technology is not an expense, but an investment in the future of their business,” he says. “By allocating CapEx funds for proptech, they're not just buying gadgets; they're building a foundation for long-term growth and profitability.”

According to Deloitte's Commercial Real Estate Outlook, more than 60 percent of business owners admit their technology infrastructure still relies on legacy systems, but only half are making efforts to modernize. To that, I’d say that even squirreling away 20 cents per square foot per year for TechEx could help owners plan to innovate in the future with hardware and software upgrades. This is especially important for smaller operators that need to be able to compete with the often more tech-savvy REITs.

“Investments in tech, anything from upgrading to smart locks and access control systems to implementing revenue management solutions and centralizing business data will pay dividends in the form of increased operational efficiency, improved customer satisfaction, and a stronger competitive advantage,” adds Watkins.

He gets no argument from me. But, because technology within self-storage can come in many forms, I thought it was important to reach out to a variety of experts within different segments of the industry to collect their thoughts on budgeting for what I’m calling TechEx.

Future-Proofing & Planning

Remote management is one aspect of self-storage that has, as Kelly Gallacher, co-founder and managing partner of Gallacher Development LLC put it in Messenger, had a “snail’s pace of acceptance.” This is changing, of course, with the pandemic in particular opening many peoples’ eyes to the possibilities of remote management. Gallacher was one of these people. Around 2021, he met with Josh Boyd, CEO of StoreEase, which specializes in virtual management technologies. “[When I walked in] I was warmly greeted by a virtual manager,” said Gallacher. “The experience changed the way I looked at the unmanned model. When developing an 85,000-square-foot facility in the Salt Lake City area, we jumped all in and incorporated StoreEase from the beginning… We have all five-star reviews for our property and tenants love the virtual two-minute move-in.”

Planning for a contactless future is one area that numerous proptech professionals believe could be locked into a CapEx budget. Rodolfo Ramirez, co-founder and COO of swivl AI, a platform for self-storage companies that employs automation and AI-powered Q&A bots, is in full support of this notion.

“When it comes to CapEx investments that are related specifically to technology, first and foremost, it’s pretty important to plan for flexibility,” says Ramirez. He brings up a recent podcast in which he interviewed Rick Beal and Magen Smith of Atomic Storage. “They discussed flexibility as a key point in their strategy to future-proof facilities by ensuring all sites, whether manned or unmanned, are equipped to transition to remote or hybrid management models if needed.”

Ramirez recounts how Rick shared that with every store their team opens, even if it’s a manned site, that they set it up so it can be remotely run someday. He believes it is this sort of foresight that saves them from having to make significant investments later when a need may arise.

“What I think is key with this approach is that it ensures the minimization of large retrofit expenses while ensuring tech CapEx aligns with long-term operational goals,” says Ramirez. “Another important aspect to underscore here is that simplifying transitions and enabling scalability through initial investments reduces the financial and logistical hurdles that may arise years down the road.”

Steven Scott, CEO of Access Storage in Canada, demonstrates this notion perfectly. When he spoke with MSM in late 2024, he mentioned that the company had been testing the water with remote management for a while. Then, when COVID shut the world down, they were already prepared. “We pre-coded about 20 of our stores to be virtual pre-pandemic. No office, no one on site. It worked seamlessly.”

Had Scott and his team not budgeted and planned for the need to go remote, the pandemic could have had much more serious consequences for their business. Today, budgeting for TechEx continues to pay off, with Scott stating that about 50 stores now follow this model. He says it has even helped when there is a labor shortage. “If we had to try to staff those 50 stores in this employment environment, it’d be a big challenge.”

Updating & Upgrading

While some tech follows a Software-as-a-Service or SaaS model, in which upgrades and updates are built into the operating budget and happen automatically, that doesn’t mean that big TechEx events won’t come up. It’s something that Janus International has worked through with many clients.

“Most owner-operators should be planning ahead for tech CapEx expenditures,” states Terry Bagley, President of Industry & Partner Relationships with Janus International, the leading manufacturer and supplier of self-storage building solutions. “Technology is iterative, so you always need to plan to make additional investments in the future. This is especially prudent for anything that’s not a true SaaS model. You’re going to have hardware, installs, and so on. Right now, there’s a lot of new IoT and AI things coming down the pike, and everyone needs to be thinking about that and planning for that.”

John Bilton, Regional Sales Manager for the Janus Nokē® Smart Entry system, concurs. “Things are changing quickly. I was out on a site not long ago and the owner had a license plate reader. Anytime he needed to pull data on a plate, that was a built-in OpEx. But eventually the hardware associated with that reader may need to be changed out. So build that into your CapEx to be able to afford the changeout when it happens. Smart locks are another CapEx event. If you don’t have them, and you’re going to want them eventually to compete, there’s the cost of hardware, the disruption to the business, and so on. The ongoing service and support will be an OpEx, but that hard asset is a CapEx that should be planned for.”

Robert Chiti, CEO of OpenTech Alliance which offers various tech solutions including access control, locks, full-service kiosks, and security monitoring, has a similar mindset. “You budget for door replacement, painting, landscaping…Technology should be no different. In fact, technology can change or become dated much faster than any of those things!”

Chiti says that while you may be able to squeeze another season out of your current paint job, waiting that long for something tech-related can really set the business back. “People didn’t used to think much about their lighting,” he explains. “Now, operators are changing it out and adding sensors to be more energy efficient and save money. There’s also access control. You used to wait until keypads broke to change them out. Now, you change them out to keep up with what's new or to install bluetooth compatible ones that don’t even require a tenant to pull out their phone. Now, you’re providing a better experience, and people will pay more for that.”

To bring home his point, Chiti holds up his phone. “When was the last time you waited until your phone stopped working to upgrade it?” It’s a well-taken point.

Digital Developments

Some tech expenses aren’t as big in scope as say, installing new smart locks or adopting a new project management system. However, keeping up with technology also means maintaining your online presence. It’s something that Jeanne Dotson, marketing director with The Storage Group, is passionate about. “It’s just as important to budget for your digital presence and online store as it is for your brick and mortar locations,” she says. “You need to be open 24/7, and you need to be where the younger generation is looking.”

She says one upgrade numerous operators have planned and budgeted for is The Storage Group’s ClickandStor™ Online Rental Suite, an extensive platform that optimizes revenue, enhances rental security, and increases a facility’s visibility. “ClickandStor integrates with most PMS systems. Often, when someone uses SiteLink, for example, at the point of transaction the look and feel of their website changes. ClicknStore can use SiteLink, but it maintains the look of your site. This creates confidence and builds trust with customers. And it’s something you’ll want to budget for.”

Jeanne says she’s also seen far too many websites that were perhaps created by a family member, or built with a free tool. And while this may have been acceptable years ago, it’s no longer going to fly. “Your website needs to be up-to-date, with the ability to reserve or rent a unit and take a transaction on the spot. And please, no stock photos. You need to have good photography.”

Josh Huff, co-owner of Lighthouse Storage Solutions, would certainly agree, as he also stresses the importance of having an updated website with current photography and even drone footage (he is an FAA-licensed drone pilot, after all). “I’ve known owners to spend a lot of money on physical site improvements, but then not spend anything on photography and a website update that would show it off,” he explains. “They budget for repair and maintenance because it’s tangible, whereas the ROI from highlighting the improvements on the website may not be immediately felt. But, if you’re not showing it off, some customers will never know about the new work, or understand why perhaps their rates went up as a result of that.”

Huff also explains how owners can get more bang for their buck by using photography and aerial footage to not just promote the facility, but look for issues with roofing, ways to improve layout, and so on. “You may even need to make an insurance claim at some point, and that footage can be used for that.” Talk about a win-win.

Working Together

Ultimately, it’s up to individual owners to decide just how much they want to keep up with the times. But, that can change a bit when they bring on a third-party management company or buy into a franchise model.

Sue Haviland, owner of Haviland Storage Solutions, says that many clients are initially skeptical of a technology budget. “Setting aside money for that is foreign for some of them – they may not even budget for new computers. So we’ll often start small and add to [a tech budget] each year. But it’s always built in for the clients I manage.”

Haviland says that money could be used for website updates, gate software upgrades, keypads, or any number of things. “For new clients, I bring them proposals with different levels of work. But most owners want to be hands-off which can be best. There’s less cooks in the kitchen, and we’re able to do what needs to be done.”

That doesn’t mean that every client is on board with the budget. “If an owner doesn’t want to do things to improve, physically or digitally, and the work environment and performance of the property is going to suffer because of it, it’s not a good fit and we will terminate that contract. We have to be on the same page to have a relationship.”

Storage Authority, the only true self-storage franchise in the United States with more than 30 franchisees operating under it, helps owners find land, plan, design and construct their facility, opening it under the Storage Authority brand name. Marc Goodin, principal at Storage Authority, makes sure franchisees are prepared to keep up with today’s technology.

“It can be hard to get self-storage owners to budget for any CapEx,” says Goodin, however it’s not always that they don’t understand the benefit of it; rather, he says the franchisees are always so successful that the ability to pay for tech upgrades is never in question. “They’ll just pull the money out when they need it.”

This doesn’t mean they shouldn’t be prepared, however. “What I think is more important is that they budget their time. They need to be reading vendor newsletters, listening to webinars, taking classes, attending self-storage events. This helps to stay knowledgeable about what’s out there and then determine what, when, and if a new technology install or upgrade would be right.”

Continues Goodin, “When a gate is broken, we know it and we fix it. But we don’t always know when our tech isn’t working; we don’t know if our SEO is still performing, for example. So we need to stay on top of that. But not every technology is going to be right for every franchisee, or maybe the tech is in its infancy so it makes sense to wait a bit. Regardless, be aware of what’s out there.”

Wrap Up

The technology train has pulled into the self-storage station, and there is no going back. And, the consensus from everyone I’ve spoken with is that CapEx needs to include a line item for technology. That’s not to say it’s always going to be simple.

“It can be easier said than done,” says Ramirez. “But if you invest the time upfront to do your due diligence while selecting technology, and prioritize technology that consistently works and is simple to implement and maintain, you’re on a good path. Remember that strategic CapEx for technology isn’t just about buying tools—it’s about creating infrastructure that supports operational efficiency, scales with growth, and ultimately delivers better ROI.”

Dr. Ahmet Kuyumcu, founder of revenue management technology company Prorize, sums things up well. “Our clients hire us because when you invest in revenue management technology, you increase leads and revenue and make better decisions. Sure, you could have saved money by not investing, but look at how much more you gain when you do. So, you should never think of technology as a cost but as an opportunity to make money. When you do that, you won’t mind budgeting for it.”

Here’s to building a relationship with your ex’s – both CapEx and TechEx.

–

Travis Morrow is the president of National Self Storage and chairman/CEO of Storelocal.

Further Reading:

Remote Management: A Snail's Pace of Acceptance by Kelly Gallacher

Women in Self-Storage: Sue Haviland, Haviland Storage Services

How To Fight And Win the Self Storage Pricing Wars by Dr. Ahmet Kuyumcu

Who's Who In Self-Storage: Mason Levy, swivl

Storage Authority Launches Free Land Review Program

Meet The Huffs: Lighthouse Storage Solutions

Combatting Crime Featuring Robert Chiti, OpenTech

Who's Who in Self-Storage: Ramey Jackson, Janus International